The concern for the property damage and third party liability associated with mold or fungus has been the focus of new insurance policy exclusions in recent years. Damage related to Exterior Insulation and Finish Systems (EIFS) i.e. synthetic stucco is a standard exclusion in all liability policies today.The deterioration of this building product has resulted in structural damage from moisture infiltration and growth of mold. In addition to this restriction most liability policies will also have a separate mold and fungus exclusion.
First party property policies are all being issued with similar mold and fungus exclusions. It would appear that everywhere you turn the insurance industry is finding another way to restrict coverage for this loss exposure.
We often find the first generation of these type of "absolute exclusions" take away things that were never intended. Consider when the pollution exclusion in the general liability policy was introduced in the 1980's. The original version excluded injury as result of smoke from a hostile fire. A tenant in an apartment fire dies as result of smoke inhalation. The apartment owner has no insurance for the wrongful death lawsuit. This is a far cry from the underground tank leaking for several years, one of the primary causes for this exclusion. Now there is an exception for hostile fire, smoke, as well as the failure of heating, ventilating and cooling equipment.
We are finding that the same is true with the issue of mold. Let's assume you are a restaurant and patrons get ill alleging that food you served was spoiled. If you have the commonly used mold exclusion you will have no coverage for this type of an incident. Liability for the customer's illness is not covered by the general liability policy since it was the result of bacteria. There is a version of this exclusion put out by ISO form CG 21 67 which has an exception for products that contain fungi or bacteria intended for bodily consumption. Like the good customer discount you have to ask for it and it is available.
Now on to property. Let's assume your building sustains a fire and in the process of extinguishing it water infiltrates into the walls that you are unaware of at the time. You then learn weeks later that mold has grown in the walls and need to be remediated. A policy with the typical biological agents exclusion would provide no coverage for cleanup with my example. It is only logical if an insurer covers a loss due to an insured peril they should also cover all the resulting damage. Some property insurers are willing to extend coverage for mold damage that results from a covered peril often with a sublimit. Some coverage for mold is better than none at all.
Now one would think that if you purchased a separate pollution liability policy you would automatically have coverage for mold damage. This is not the case since most insurers attach a mold exclusion in their standard policy. Usually, a mold coverage extension can be negotiated with the insurer which will usually have a separate sublimit and deductible. Here again some coverage is better than none.
The message here is watch for mold limitations in your insurance policies. There are circumstances where coverage carve backs are available.
